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Business Administration, Management, and Operations

Abstract

Commitment human resource systems (CHRS) are used to elicit an employee's long-term commitment to the firm, and research has shown that CHRS are positively associated with firm performance. Yet, firms appear reluctant to use these HR systems. Large shareholders such as institutional investors and founding family owners have been found to influence the strategic decision making of the firm, yet they have been largely absent from the strategic human resource management literature. This is unfortunate given the strong influence that large shareholders can exert on firms. Thus, this study examines the relationship between large shareholders such as institutional investors and founding family owners and CHRS. Overall, the findings indicate that founding family owners and transient institutional investors tend to influence the firm's propensity to use CHRS. Specifically, founding family ownership stake is positively associated with the use of high performance HR practices; whereas, the relationship between founding family ownership stake and employee involvement HR practices is positive up to the founding family owning 11.22 percent of the total common shares outstanding. In addition, transient institutional investors, in general, tend to oppose the use of CHRS. Finally, large shareholders are associated with the firm having cash profit sharing, sufficient retirement benefits, and work life benefits. Given this, large shareholders ought to be considered in future studies as another factor that serves to either enable or constrain the firm's use of CHRS.